Transformation Brownout: Is Your Playbook Your Friend or Your Enemy?

By Sumeet Salwan , Co-Founder of CEO.works and Bill Allen , Senior Partner at CEO.works

Change is accelerating at companies, especially in this new era of artificial intelligence (AI), and managing this change is putting Chief Executive Officers (CEOs) at even greater risk of maintaining their positions than they were already facing.

CEOs are spending fewer years in their positions as their tenure has decreased significantly. According to recruitment company Zippia, Inc., in 2023, the average CEO tenure for S&P 500 companies was 7.2 years (a decrease from 10.9 years in 2017), the median CEO tenure was 4.8 years and 39% of CEOs stayed in their positions for less than five years. The COVID-19 pandemic certainly affected CEO turnover, but the increased pace of change has created a new business climate as well.

Responding to change in this new business climate is complicated because the traditional way of managing change is no longer effective. This new business climate requires new thinking. The focus of this new kind of change management must be on value. At CEO.works, we work with CEOs on talent solutions that accelerate value creation.

"The biggest challenge CEOs face in transformation is they are all failing because the nature of transformations has changed, but the playbook is very outdated."

Imagine this scenario as a CEO: You’ve written a new strategy. You’re looking for new people, which takes time. You’re jamming up work in a transformation/program office, which is creating indigestion in the organization. For a world where change is like a low-grade fever, this is death. You must cure the indigestion and treat the low-grade fever with minimally invasive and precise interventions. Your playbook needs to pivot to a world of precision transformation and continuous change.

RESPONDING TO CHANGE

How can CEOs deal more effectively with necessary change?

It’s not an easy task to be a leader in a rapidly changing environment. Leaders themselves must change in order to successfully guide their organizations through transformation. As described in “Re:Start. Values-based leadership in a changing world,” by Hélène Barnekow (with Nina Pettersson), “Leadership roles . . . take courage – a lot of courage – to manage the complex stakeholder map, the fast-changing times, the demanding customers, the employees, and the constant influx of new technology. And it takes humility to realize that we don’t know everything, that we truly need diverse perspectives in the room and need to be curious about what we don’t know.”

Hélène should know; she has been a leader at several international companies across many continents, including Ericsson, Sony Ericsson, EMC and Telia, and CEO of Microsoft Sweden. In this book, she does an excellent job of explaining how to build an organization that is resilient through a new lens of leadership.

From a CEO.works perspective, one of the key foundational guidelines is to understand the fastest path to creating value with the least disruption to the organization, which we call Talent to Value. Transformation should no longer resemble the fleeting New Year’s diet but must become a new, sustainable lifestyle in organizations.

PRECISION TRANSFORMATION

Throughout our careers and extensive experience in transformations, including at Unilever, Johnson & Johnson, PepsiCo and A.P. Moller-Maersk, we have seen all (and been involved in some) of the mistakes so many companies make. There are three primary causes of failed transformations – poor talent choices, not enough talent where value is created in the organization and initiative overload (usually vested in the all-too-powerful transformation/program office). The Talent to Value approach for leading precise transformations in today’s ever-changing business climate outlines essential actions for CEOs to take to address each of these in a precise, focused and highly impactful way:

1. POOR TALENT CHOICES

Organizations must go beyond talent to identify role-talent risk. Talent decisions should be made in the same way investment decisions are made – with rigor, judgment and evidence-based thinking versus too many opinions, being blind to risk and “falling in love.”

CEO.works Insight: 65% of talent derailments are caused by unrecognized role risk and/or misaligned work that create false starts and burn precious time. Poor role design, misaligned work or a poor talent fit all work against transformation success.?

2. NOT ENOUGH TALENT

The traditional approach to change management was, “If I get the CEO and the C-Suite right, everything will be fine.” This trickledown theory of talent management no longer works. It can take 12 to 18 months to get the C-Suite right and then another 12 to 18 months to get the rest right. CEOs now must change both at the same time, and they must do it quickly. CEOs must realize they are on the clock and they are on the scoreboard. Their goal is to drive value up and drive time down. They no longer have the time they once had because the world is changing quickly. Precision transformations rely on quick, constant mobilization using the Human Capital Balance Sheet as a roadmap. This ensures continued alignment and allocation of talent to the work required to create the value. The roles that will bring the value to life are not the traditional ones that most would expect. A handful of critical roles linked to value hotspots are often two, three and four levels below the CEO.

CEO.works Insight: The Human Capital Balance Sheet is a heat chart that summarizes critical roles (including executive roles), the link to value, risks associated with the role, operating model, work and finally talent. Identify a few critical roles (maximum of 25-30) that do this work. Simplify the work that needs to be done to bring the value to life.

3. INITIATIVE OVERLOAD

Transformations go to die in project and program offices where obligatory progress assessments are presented across hundreds of lines of spreadsheets. In the past, CEOs would think big, start big and move really, really slowly to bring about change. Today, CEOs must think small, start small and move fast – and don’t stuff a bunch of work in the program offices, giving the organization “indigestion.” The solution is to simplify the approach, reduce initiative overload and create momentum by deeply understanding the four to six value hotspots of the organization that capture the majority of the value. Then define the work required to bring the value of each hotspot to life. Throughout the process, organizations should follow the CEO’s Checklist, the fewest possible items that the CEO drives and reviews with the Board regularly.

CEO.works Insight: An aligned, focused view of the value hotspots (drivers) eliminates all the noise and functional agendas that create initiative overload. The actual work that is required to successfully execute strategy is often overlooked and may be even lost in the program office due simply to the failure to identify and understand the granular work that creates value. Identify the biggest risks to value, who has the authority to fix them and the most direct and simplest solution.?

A CALL TO ACTION

The success of the organization, the CEO and the C-Suite in responding to change and driving transformation must be rethought. Following the playbook of Talent to Value can bring precision transformation to reality in organizations. With precision transformation, organizations will notice an acceleration in execution, reduced friction/drag and a risk-aware mindset – all resulting in an organization primed to win and sustainably create value.

To learn more and begin the journey of driving precision transformation, contact the CEO.works Talent to Value Academy at [email protected].